A-H premium rise in Chinese stocks

Chines stock are turning out as best performing asset class with Shenzhen index rising close to 40% YTD beats all the stock markets around the world. Closest competitor is Denmark, which saw a rise of 28% YTD. Main index CSI300 rose 16% YTD. Chart courtesy Financial Times.

What is A-H premium?

Hong Kong has traditionally remained preferred hub for companies to float shares to tap foreign capital. Many companies float stock both in mainland and Hong Kong. The price differentials between the same shares in two region is called A-H premium.

• Traditionally Shanghai market has traded in discount to Hong Kong, however this year investors are paying as high as 34% more to hold stocks in mainland market.
  
  
• Some of the companies are providing big time arbitrage opportunities. As explain in the charts from Financial Times.
  
  
• Hong Kong listed shares of Shanghai Electric rallied 20% on Monday, however it still remains one tired the price of A shares listed in Mainland.
  
  
• China Railway Construction Corporation, is trading close to 50% discount in Hong Kong, compared to Mainland.

Recent buying frenzy in Mainland over margin debt, looks like a potential bubble in that market. However arbitrage opportunities remain at large.